Jordan Strategy Forum calls for clear legal framework for investment funds

AMMAN — A recent study by the Jordan Strategy Forum (JSF) recommended drawing up a “clear” legal framework to organise the work of investment funds in Jordan to ensure a better financial, technical and logistic support for small-and-medium-sized businesses (SMEs). 

In the study, the JSF underlined that, although SMEs are considered the backbone of national economies’ development, especially due to their role in combating unemployment and poverty, they face many challenges since banks and other financial institutions refrain from extending the necessary loans due to a lack of guarantees in this type of businesses. 

The forum also noted that small businesses are unable to access financial markets, therefore making investment funds, such as venture capital and private equity funds, the “best” instruments to support starting and struggling enterprises. 

The recommended legal framework, according to the JSF, should define the relationship between the state and investors in a way that protects the interests of both sides and facilitates the work of the private sector in order to enable it to actively contribute to economic growth. 

It should also ensure the independence of investment funds and encourage their diverse operations, while setting up rules to guarantee good governance, the study noted.

The study also cited several obstacles that investment funds face today, including the Companies Law, which does not organise the work of investment funds according to the best international practices and lists “unfavoured” types of companies for people who wish to establish investment funds. 

The Jordan Securities Law and the Jordan Investment Fund Law are also considered “restrictive” for investors in many aspects, including by limiting the economic activities of investment funds to specific ventures and by requiring them to wait for the Cabinet’s approval for projects in the fields of energy, water, transport and infrastructure, according to the JSF. 

However, Chairman of the Jordan Chamber of Commerce, Senator Nael Kabariti, noted that the obstacles facing investments are not the laws, but rather their application. 

“We have an excellent investment environment in Jordan and good laws, but the issue is in the mindset that insists on handling things in a bureaucratic manner, which eventually renders even the greatest laws unfruitful and unable to bring the desired change,” he told The Jordan Times on Thursday. 

The study also noted that the current taxation system is believed to”hinder” efforts to attract investors in investment funds, calling for exempting investment revenues from taxes.